The state-owned Government Savings Bank (GSB) tightened its personal loan extensions by halving credit lines to guard against rising non-performing loans (NPLs) as living costs and household debt hike.
The bank cut credit lines for personal loans to 15-20 times applicants' monthly salary, depending on debt payment ability, from 30 times.
"We have not stopped extending loans, but we have adjusted conditions concerning credit lines to stave off rising bad loans," said president and chief executive Woravit Chailimpamontri, adding the bank maintained its minimum salary requirement for potential borrowers.
The move is in line with other financial institutions enacting more stringent loan criteria to fend off rising bad loans as household debt levels skyrocket.
Personal loans account for 55% of its loans outstanding of 1.7 trillion baht, and low-income earners are the bank's main customers.
The bank's NPLs are steady at 1.3% of its total loans, the same as the middle of last year.
Mr Woravit said personal loan growth is still robust, but the expansion rate will be lower than in the past because of economic circumstances.
Most of the bank's borrowers whose debts turned sour are officials who allowed the bank to automatically deduct repayment in instalments from their salaried accounts. This group tended to also borrow from their agencies' cooperatives, which have first access to salary deductions, leaving insufficient money for bank deductions, he said.
Problem loans could be temporarily solved by extending repayment periods, said Mr Woravit.
Specialised financial institutions (SFI) under the Finance Ministry and Krungthai Bank (KTB) have agreed to provide short-term financial liquidity to one another without relying on the interbank market, he said, adding that GSB, KTB and the Bank for Agriculture and Agricultural Cooperatives (BAAC) will provide loans with longer terms and in higher amounts than those provided in the interbank market. This channel offers up to 2 billion baht to each SFI, doubling the maximum amount provided to them in the interbank market.
The bank aims at extending 100 billion baht to the government's projects, he said.
The GSB is expected to be one of the banks to benefit from the government's hefty borrowing plan to finance its 2 trillion baht in infrastructure projects.
The bank's new deposits will likely reach 130-140 billion baht this year, exceeding its 120 billion target, after it raised around 90 billion for the first nine months this year. Its net profit stood at 17 billion baht during the first nine months, compared with its full-year target of 21 billion.